The Rise Of Africa

For decades, much of the world has been conditioned to think of Africa, from Tangier to the Cape of Good Hope, as a uniform morass of poverty.

Nevertheless, it's limiting and unfair to treat a 12 million-square-mile continent with a billion people as a single entity. No one assumes that Finns and Greeks share a culture, nor Canadians and Mexicans; yet to many uninformed critics, Africa is one homogeneous outpost of poverty and starvation. Not only is that the grossest of generalizations, it's inaccurate.

Africa Today and in the FutureNo, Africa doesn't enjoy quite the standard of living that the world's richest countries do. On the United Nations Human Development Report, the highest-ranking sub-Saharan nation on the African mainland is Gabon, which came in at a modest #106. However, the country is inching upward, progressing along a timeline common among many African nations: colonialism, followed by nominal independence, followed by long-overdue economic reforms and a corresponding increase in the standard of living. It was over a relatively brief period - barely two generations - that South Korea and the United Arab Emirates propelled themselves from destitution to affluence. Today, we could be witnessing that same phenomenon across Africa.

The International Monetary Fund (IMF) predicts that between now and 2015, Africa will be home to seven of the world's 10 fastest-growing economies. In descending order, that's Ethiopia, Mozambique, Tanzania, West Congo, Ghana, Zambia and Nigeria. (Granted, "fastest-growing" is hardly the same as "flourishing;" by contrast, the American and Luxembourgish economies can't possibly grow as quickly as ones whose every incremental step is noteworthy.) Finally, after countless years of mass governmental corruption abetted by misguided charity, much of Africa is jumping into the 21st century.

Look no further than the sophisticated financial instrumentation befitting sophisticated economies - specifically, exchange traded funds devised to attract Western investment. Van Eck Global, a New York-based management firm, developed the Market Vectors Africa Index ETF (NYSEArca:AFK) for that very purpose. The fund restricts itself to companies that either are headquartered in Africa, or derive most of their revenues from there. The fund's main components include Tullow Oil, a British oil producer whose biggest operations are in Ghana and Uganda; Orascom, an Egyptian construction firm; Guaranty Trust, a Nigerian bank; and Attijariwafa, a Moroccan bank, with other banks and breweries rounding out the top 10. It may come as a shock to some, but Africans deposit their money somewhere and build buildings, and drink beer, just like the rest of us.

Trade, Not AidHopefully, investment will overtake handouts as the predominant form of cash flow to Africa. By and large, being on the receiving end of the rest of the world's largesse has had the opposite of its intended effect. Zambian intellectual colossus Dambisa Moyo (chemist; economist; master's from Harvard; Oxford Ph.D.; director of Barclays Bank, SAB Miller and Barrick Gold, and only 42 years old) wrote the definitive book on this topic, "Dead Aid: Why Aid Is Not Working And How There is Another Way for Africa."

She argues that the $1 trillion of well-meaning handouts that have found their way to her home continent have done more harm than good, creating a culture of idleness and indolence ("Why work when I can get what I want from a relief organization?"), and that's the best-case scenario. More often, aid payouts never even found their way past the people in charge.

The modernization of the continent is something best witnessed firsthand. A visitor to Cape Town or Windhoek would be struck by how gleaming and modern either southern African capital is. While the former does have shantytowns on its outskirts, they're strikingly similar to some of the filthier housing projects in the United States.

Unfortunately, most of the major news stories that have emerged from Africa in the last few years have been horrifying (Darfur, the Rwandan genocide.) In addition, the stories that haven't emerged have been even worse. (Like the Second Congo War, humanity's deadliest conflict since World War II. Yes, there was a First Congo War in the late 90s that you probably never heard about either.) This is the same continent that spawns a disproportionate number of the engineering and mathematics graduates at some of America's most prestigious universities - the people who will shape Africa's future.

The Bottom LineAfrica has all the natural resources a continent could hope for, and is finally assembling the wherewithal to capitalize on that. The Industrial Revolution began in the United Kingdom almost two centuries ago, moving society en masse from an agrarian, subsistence economy to one characterized by force multipliers. Today, in a world where information flows freely and trade lifts millions out of poverty every year, Africa has only started to reach its potential and promise.